Accounting 200 Final Terms
fixed costs examples
-property taxes -rent -equipment -advertising
within the relevant range, a difference between variable costs and fixed costs
-variable costs per unit are constant - fixed costs per unit fluctuate
Which of the following statements is true? 1. A benefit from budgeting is that it forces managers to think about and plan for the future. 2. One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks. 3. One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.
1
Which of the following statements is true? 1. The budgeted income statement is typically prepared before the budgeted balance sheet. 2. The cash budget is the starting point in preparing the master budget. 3. The production budget is typically prepared prior to the sales budget.
1
Which of the following statements is true? 1. Budgets are used for the distinct purposes of planning and profit. 2. Control involves developing goals and preparing various budgets to achieve those goals. 3. A continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.
3
master budget
A number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.
Which of the following statements is true? 1. The master budget consists of a number of separate but interdependent budgets. 2. The production budget is typically prepared before the direct materials budget. 3. The selling and administrative budget is typically prepared before the cash budget.
All
selling costs
All costs that are incurred to secure customer orders and get the finished product or service into the hands of the customer. can be direct or indirect
Administrative costs
All executive, organizational, and clerical costs associated with the general management of an organization rather than with manufacturing or selling can be direct or indirect
Which of the following statements is true? I. In the manufacturing overhead budget, the non-cash charges (such as depreciation) are deducted from the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead. II. The manufacturing overhead budget lists all costs of production other than direct materials and direct labor.
Both
Which of the following statements is true? I. The direct labor budget begins with the required production in units from the production budget. II. The direct labor budget shows the direct labor-hours required to satisfy the production budget.
Both
Which is NOT a period cost? 1. Depreciation of factory maintenance equipment. 2. Salary of a clerk who handles customer billing. 3. Insurance on a company showroom where customers can view new products. 4. Cost of a seminar concerning tax law updates that was attended by the company's controller.
Depreciation of factory maintenance equipment
The relative proportion of variable, fixed, and mixed costs in a company is known as the company's
cost structure
There are various budgets within the master budget. One of these budgets is the production budget. How would you describe the production budget?
It is calculated based on the sales budget and the desired ending inventory.
operating budgets...
cover a one-year period and many companies divide their annual budget into 4 quarters
direct materials
Materials that become an integral part of a finished product and whose costs can be conveniently traced to it. examples: doors on whirlpool washing machines
Which of the following budgets are prepared before the sales budget? Budgeted income statement and Direct Labor Budget?
Neither
a manufacturer's product flows through 3 inventory accounts such as
Raw Materials, Work in Process and Finished Goods
what is the first step in the budgeting process?
preparing a sales budget
contribution format
Sales Variable Expenses Contribution Margin Fixed Expenses Net Operating Income
Indirect materials
Small items of material such as glue and nails that may be an integral part of a finished product, but whose costs cannot be easily or conveniently traced to it
Which of the following statements is true? I. The selling and administrative expense budget lists all costs of production other than direct materials and direct labor. 2. The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit. 3. The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends.
The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit.
Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?
The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.
Indirect labor
The labor costs of janitors, supervisors, materials handlers, and other factory workers that cannot be conveniently traced to particular products.
which of the following statements is a common assumption underlying cost volume profit analysis? a. the variable cost per unit remains constant b. selling price per unit remains constant c. total fixed costs are constant within the relevant range d. the total variable costs remain constant as the level of sales fluctuates
a, b and c
continuous budget
a 12-month budget that rolls forward one month as the current month is completed
which of the following cost behavior assumptions is true? a. variable costs are constant if expressed on a per-unit basis b. total variable costs increase as the level of activity increases c. the average fixed cost per unit increases as the level of activity increases d. total fixed costs decrease as the level of activity decreases
a and b
which of the following statements is false? a. Under some circumstances, a sunk cost may be a relevant cost. b. Future costs that do not differ between alternatives are irrelevant. c. The same cost may be relevant or irrelevant depending on the decision context. d. Only variable costs are relevant costs. Fixed costs cannot be relevant costs.
a and d sunk costs are ALWAYS irrelevant fixed costs CAN be relevant
an example of a committed fixed cost is... 1. management training seminars 2. a long-term equipment lease 3. research and development 4. advertising
a long term equipment lease
if the contribution margin is not sufficient to cover fixed expenses
a loss occurs
which of the following statements is true? a. indirect materials and indirect labor are included in manufacturing overhead b. examples of selling costs include sales commissions advertising, shipping, and the costs of operating finished goods warehouses c. for financial accounting purposes, product costs include direct materials, direct labor, and manufacturing overhead d. for financial accounting purposes, period costs are also referred to as inventoriable costs
a, b, c
which of the following costs would be variable with respect to number of cones sold at Baskin Robbins?
a. cost of lighting in store b. wages of store manager c. cost of ice cream d. cost of napkins for customers
An unfavorable materials quantity variance indicates that
actual usage of material exceeds the standard material allowed for output.
Which of the following is an example of a period cost in a company that makes clothing? 1. Fabric used to produce men's pants. 2. Advertising cost for a new line of clothing. 3. Factory supervisor's salary. 4. Monthly depreciation on production equipment.
advertising cost for a new line of clothing
period costs
all costs that are not product costs ALL SELLING AND ADMINISTRATIVE EXPENSES ARE TREATED AS PERIOD COSTS examples: sales commissions, advertising, rental costs of administrative offices
manufacturing costs
all manufacturing costs except for direct materials and direct labor and they are INDIRECT
the salary paid to the president of a company would be classified on the income statement as
an administrative expense
common cost
an indirect cost, it's irrelevant
Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called
avoidable costs
Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year?
contribution margin ratio= increase break even point = decrease
Which of the following statements is true? a. Product costs are expenses on the income statement in the period incurred b. Direct labor is a manufacturing cost and a product cost c. conversion costs include direct materials and direct labor d. non manufacturing costs are treated as period costs
b and d
bottom up budgeting
budget goals are set by carious operating departments. they push the revenue and expense goals up the corporation.
top-down budgeting
budget goals are set by the corporation and the operation is expected to make the budget work. Usually the corporation will set revenue and net income goals
participative budget
budget that is prepared with the full cooperation and participation of managers at all levels
11. Which of the following statements is true? a. Common fixed costs should be allocated to business segments when making decision because all a company's costs need to be covered to be profitable. b. When making business decisions, common fixed costs should be allocated to business segments based on each segment's sales revenue because this reflects each segment's "ability to bear" additional costs. c. Common fixed costs should not be allocated to business segments for decision-making purposes. d. When making decisions, allocating common fixed costs to segments may understate the true profitability of those segments.
c and d
direct cost
can be easily traced to a cost object
indirect cost
cannot be easily traced to a cost object
which of the following statements is true? a. the manufacturing overhead budget includes depreciation related to assets that support a company's selling and administrative functions b. cash disbursements for selling and administrative expenses are reported in the budgeted income statement c. the selling and administrative expense budget includes depreciation related to manufacturing assets d. the total variable and fixed selling and admin expenses incurred during a period are reported in the budgeted income statement
d
fixed costs on a per unit basis
decrease with increase in activity
Fixed costs per unit
decreases as activity level rises
All of the following are examples of product costs except: 1. depreciation on company's retail outlets 2. salary of plant manager 3. insurance on factory equipment 4. rental costs of factory equipment
depreciation on company's retail outlets
the salary of head of pediatrics on the pediatric department
direct
direct or indirect: wages of pediatric nurses at a pediatric department
direct cost
lab tests by outside contractor on a particular department
direct cost
lab tests by outside contractor on a particular patient
direct cost
prescription drugs on a particular patient
direct cost
conversion cost
direct labor and manufacturing overhead
manufacturing two DIRECT cost categories:
direct materials and direct labor
prime cost
direct materials and direct labor
product costs include
direct materials, direct labor, manufacturing overhead examples:
direct labor
factory labor costs that can be easily traced to individual units of product
A budget that is based on the actual activity of a period is known as a
flexible budget
A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will
have no effect on the break-even volume.
prime costs
include direct materials and direct labor
once a company hits its break-even point, net operating income will
increase by an amount equal to the contribution margin per unit multiplied by the number of units sold above the break even point
Variable Cost in total
increases and decreases in proportion to changes in the activity level
the salary of the head of pediatrics on a particular pediatric patient
indirect
heating the hospital on the pediatric department
indirect cost
hospital chaplain's salary on a particular patient
indirect cost
product costs are also known as
inventoriable costs
committed fixed costs
long-term, cannot be significantly reduced in short term examples: depreciation on buildings equipment and real estate taxes
manufacturing INDIRECT cost category:
manufacturing overhead
discretionary fixed costs
may be altered in the short term by current managerial decisions examples: advertising and research and development
which of the following would not affect the breakeven point?
number of units sold
period or product: depreciation on a salespersons car
period
opportunity cost
potential benefit is given up when one alternative is selected over another
which of the following would be considered a period rather than a product cost in a manufacturing company? A. Manufacturing equipment depreciation B. Property Taxes on corporate headquarters C. Direct materials costs D. electrical costs to light the production facility E. Sales Commissions
property taxes and sales commissions
the manufacturing overhead budget
provides a schedule of all costs of production other than direct materials and labor costs, shows expected cash disbursements for manufacturing overhead, and is prepared after sales budget
When preparing a direct materials budget, the required purchases of raw materials in units equals:
raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
Fixed costs in total
remains constant
Variable Cost per unit
remains constant
Which of the selling and administrative expenses of the company is variable? rent sales commissions maintenance expense clerical expense
sales commissions
variable costs examples
sales commissions, credit card fees, hourly wages, and material costs
contribution margin is
sales less variable production, variable selling and variable administrative expenses
nonmanufacturing costs are also called
selling and administrative costs (SG and A)
nonmanufacturing costs are divided into two categories:
selling costs and administrative costs
the cash budget
should be prepared before the budgeted income statement and the budgeted balance sheet, and builds on earlier budgets and schedules as well as additional data
A cost incurred in the past that is not relevant to any current decision is classified as a
sunk cost
An example of a committed fixed cost would be: 1. taxes on real estate 2. management development programs 3. public relations costs 4. advertising programs
taxes on real estate
in a flexible budget, what will happen to fixed costs as activity level increases?
the fixed cost per unit will decrease
The usual starting point for a master budget is
the sales forecast or sales budget
the breakeven point occurs on the CVP graph where
total contribution margin equals total fixed expenses
Direct Labor is a manufacturing cost and a product cost
true
Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.
true
Non manufacturing costs are treated as period costs
true
Which costs will change with a decrease in activity within the relevant range?
unit fixed costs and total variable cost
A merchandising company typically will have a high proportion of which type of cost in its cost structure?
variable
3 cost classifications
variable, fixed and mixed
variable costs can be expected to
vary in total direct proportion to changes in activity level